“You can’t expense your way to victory.” – John Barreto, Director of Stores, Britches of Georgetowne, circa 1994
Back in my retail days, we had a few down seasons of sales. Coming to think of it, we had a couple down years. OK, in retrospect, the business was hemorrhaging year after year until the company finally vanished into the great out-of-season closet in the sky in January 2002, long after I had jumped ship (translation: blame someone else, I wasn’t there). In an effort to keep the business afloat, we tried everything – clearance sales, buy-one get-one promotions, location consolidations, personnel cuts. Nothing seems to right the ship.
The most popular strategy from the executives at the time was to attack the company’s largest expense – payroll. “Do more with less” was not a unique approach, of course. Every company in America (except Google, perhaps) has faced this marching order at one time or another. As technology continues to improve productivity, it could be that the “Do more with less” organizational mantra will never cease to be chanted in boardrooms everywhere. Productivity gains fueled by technological advances seem to have no limit.
Truth be told, there was some fat to be trimmed in our fledgling clothier business, and we learned to look at various expense lines on an hourly basis, particularly payroll. That was smart business, and it helped sustain us in the short term. In the long term, it killed us. The smart business approach of controlling expense costs took on a life of its own over time, and it became all-consuming, to our detriment.
Our Regional Manager at the time, John Barreto, made a statement during a planning meeting that stuck with me: “You can’t expense your way to victory.” The simple sentiment was that an exclusive focus on the expense side of the ledger was not a strategy to build revenue on the other side of the ledger. Each expense had to be weighed and evaluated against its contribution to building sales and revenue. If you ignore tomorrow’s investments, your heroic cost-cutting efforts to save the business today will be wasted.
The narrative that has captured the day in U.S. political circles is that we can expense our way to victory as a nation. A singular focus, or obsession, with only the spending side of the ledger will result in short-term gains at the expense of long-term viability. Let the general populace argue about today. Our leaders need to debate and plan for tomorrow. That’s how a republic should work.
After the budget cutting frenzy, after the victim is picked clean by the TP sharks, what is the plan for building the U.S. infrastructure to sustain future success in a global marketplace? I know that thinking about tomorrow is not part of the American psyche when just keeping up with today is a challenge. Today’s crises have become so all-consuming that daily distractions have been given a positive sounding name – multitasking. Cognitive dissonance at work!
As one example, futurists see a world where 90% of all U.S. jobs could require a college degree, yet less than 30% of adults in 2008 have their $200,000 sheepskin. Our choices at that point are stark. We can dumb down the jobs to fit the available workforce; we could outsource the work to countries that are preparing their population for tomorrow’s jobs; or we could invest in educating our workforce to compete and fill those jobs. Reasonable minds can debate the best way to accomplish the latter, but to survive as a preeminent power in the world, we have to have this debate. Our laser-focus on expense cutting while demogoguing any investment in the future as ‘wasteful spending’ is drowning out that debate. This isn’t a theoretical, elitist classroom exercise. This has real world implications, and soon.
Just as rural electrification changed the calculus for hundreds of communities around the country, rural broadband access has the same power to grow businesses in these areas. Tomorrow’s economy will depend on that kind of access. Will we be ready, or will we wait for private industry to decide to expand broadband once it’s profitable? That could be too late.
As much as I might have disagreed with him over the years on a variety of issues (like the best way to stagger cashier coverage on a busy back-to-school Saturday), Barreto was right on this one. You cannot expense your way to victory, and neither can this country. Let’s be smart about what we choose to cut, and where we choose to invest. Make no mistake, we still need to cut, but make no mistake, we still need to invest. Let’s plan for America to last a little longer than my former employer. Let’s at least have the debate.
At the risk of sounding too partisan, that’s a “balanced approach”.